Safaricom, weighing up an offer for Ethiopia’s telecommunications business later this year, plans to take on debt to fund a joint bid by a consortium including parent Vodacom Group and two other entities.
“We do know the investment to build the network in Ethiopia will be big,” Safaricom’s interim CEO Michael Joseph said in an interview at the company’s Nairobi headquarters. “So all of us will have to borrow to invest. The composition of the consortium will be on your willingness and your capability of taking on debt and your willingness to take a risk.”
The privatisation of Ethiopian Telecommunications Corp and issuance of two spectrum licences has been delayed by elections that were pushed to August from May, according to Joseph. The government of Prime Minister Abiy Ahmed hasn’t yet provided guidance on the bidding process including any limits of foreign investors ownership, he said.
East Africa’s biggest company had total borrowings of US$39.5-million in 2019, and $358-million in undrawn bank facilities, according to its annual report. Revenue has been rising every year since 2003, when the company became profitable.
Unlike Kenya, where Safaricom’s business became profitable within three-and-a-half years, Joseph said Ethiopia is “probably a 10-year journey”.
Opening up the telecoms industry is part of a raft of reforms to liberalise Ethiopia’s economy as Abiy looks to increase foreign capital inflows. Other carriers including Orange and MTN Group have expressed interest in expanding in the nation with a relatively low level of data penetration and Internet access, as well as the second highest population in Africa of more than 100 million people.
In December, Ethiopia’s investment promotion agency released proposed regulations that would reserve banking and micro-finance for local investors, which would prevent Safaricom from providing such services via its M-Pesa payments platform.
“We cannot go in there as Safaricom and provide mobile money services if we have to give it all away to somebody else just under some sort of technical support,“ Joseph said. “We will if we have to but in the end we want to have a licence to provide those services so the regulations will have to change.” — Reported by Bella Genga, (c) 2020 Bloomberg LP